Despite signs of improvement in Italy and Spain, manufacturing activity across the euro zone deteriorated further in March, contracting at a faster pace than in February, a careful review showed on Tuesday.
Survey shows demand continues to decline, but optimism is still rising, suggesting the region could soon see a broader recovery .
The final Eurozone Manufacturing Purchasing Managers' Index (PMI) compiled by S&P Global was 46.1 in March, down from 46.5 in February and above the preliminary figure of 45.7. It has remained below 50, which indicates an increase in activity, for the 21st consecutive month.
The index, which measures output and is reflected in the composite PMI to be released on Thursday and is considered a good indicator of economic health, rose to 47.1 from 46.6 in February, above the preliminary figure of 46.8.
“Today's PMI results demonstrate the major challenges facing European manufacturing. Materials shortages have eased somewhat, but the outlook remains uncertain,” said Accenture's Goetz Erhardt.
Manufacturing in France fell at a faster pace last month, although it was less severe than preliminary estimates, while in Germany, Europe's largest economy, the decline in production, which accounts for about a fifth of gross domestic product, The sector continued to decline.
Spain's factory activity expanded for the second month in a row in March, despite a decline across the eurozone, while Italy showed signs of recovery after 11 consecutive months of contraction, earlier figures showed.
Irish manufacturing contracted in March after briefly resuming growth a month ago. The PMI has been below 50 for most of the past 17 months.
Outside the EU, the UK reported overall growth in manufacturing activity for the first time in 20 months thanks to a recovery in demand in its home market, adding to signs that last year's shallow recession is over.
New orders in the euro zone fell for the 23rd straight month, even as factories cut prices at the fastest pace since November. Any signs of easing inflation pressures are likely to be welcome news for the European Central Bank (ECB) as it seeks to get inflation back on target.
Preliminary data shows that inflation fell in six economically important German states last month, suggesting that national inflation will continue on a downward trajectory.
ECB President Christine Lagarde told European Union leaders last month that inflation in the euro zone would continue to fall, while economic growth would start to accelerate by the end of the year.
Eurozone factories have cut jobs again, but in a sign that managers expect future output to pick up, the index of optimism rose from 57.1 to 57.4, the highest level since April last year. became.
